Digi International DGII Q4 2026: Strong Beat, but Slower Growth Ahead

Digi International closed fiscal 2026 with a quarter that topped expectations on both lines. Adjusted EPS came in at $0.78 against a consensus of $0.764, a beat of about 2%, while revenue of $143.3 million exceeded estimates of $140.3 million by 2.18% and climbed 25.4% year over year. Operating income surged 66% year over year to $23.7 million, helped by operating expenses falling to 47% of revenue from 51% the prior year, lifting operating margin 400 basis points to 16.5%.

The two reporting segments both contributed. IoT Products and Services revenue rose 28% to $105 million, with ARR in that segment more than doubling to $64 million, primarily on the Particle by Digi acquisition. IoT Solutions grew 20% to $38 million, with segment margin expanding 590 basis points and ARR climbing 11% organically to $133 million. Combined, those gains pushed total company ARR to $197 million, just $3 million short of the $200 million milestone that CEO Ron Konezny called one of the company's two five-year goals set at the start of fiscal 2024.

The pending $130 million acquisition of Norway-based Disruptive Technologies is the next meaningful catalyst. Management expects regulatory approval and a close by November 30, 2026. The deal is expected to extend the SmartSense by Digi platform into Europe and into building automation and occupancy markets, with Disruptive Technologies' sensor hardware eventually migrated onto a subscription model. Konezny said the company looks forward to welcoming the team and its leading sensor technology once the transaction closes.

For fiscal 2027, management guided full-year revenue growth of 10% to 15%, implying a range of roughly $588.7 million to $615.5 million, and adjusted EBITDA growth of 12.5% to 17.5%. That represents a noticeable deceleration from fiscal 2026's 24.4% revenue growth, and the guidance includes the Disruptive Technologies contribution assuming a November 30 close. For the first quarter of fiscal 2027, the company guided revenue of $140 million to $144 million and adjusted EPS of $0.71 to $0.75, a step down from Q4's $0.78.

One headwind management flagged explicitly is component costs. AI data center construction has pressured memory and other component supply chains, with Konezny noting the surge has spilled over into components fighting for capacity all the way down to the fab level. That dynamic, combined with seasonally tighter channel inventory in the first fiscal quarter, explains much of the near-term guidance step-down even as the longer-term ARR and EBITDA targets remain intact.